1. The document at Annexure A-2 along with the revision produced in Civil Suit No. 28 of 1971 is tried to be impounded by holding it to be a lease within the meaning of clause (n) of Section 2 of the Bombay Stamp Act, 1958 and duty and penalty has been demanded applying Article 36 (vii) of that Act.
2. The concerned document purports to be of 3rd July 1974 and recites amongst other that certain terms and conditions were put forward and were being accepted. Those terms are set out as terms and conditions under the signature of tenants. Document produced at Annexure A-1 of 1-8-1968 is a letter sending three months' rent for the block allotted. In the disputed document itself, there is no demise of the property, not under it the lease agreed between the parties is mentioned. The sum and substance of the entire document is laying down certain conditions that would be binding on the tenant and the Corporation the lessor during the continuance of the demise which is not witnessed by the document nor is created under it. Dominantly, therefore, the document evidences the collateral terms and nothing more.
3. The principle on which the liability under fiscal statutes like Stamp Act is cannot be disputed. The interpretation has to be according to strict letter of the law and not only in case of doubt but in case of beneficial interpretation favouring the subject, the rule is to tend in favour of the subject rather than the exchequer. There being no equity in the matters of taxing statutes, the Court adheres and follows this path to substantially advance the cause of the disputes. (See A. V. Fernandes v. State of Kerala, : 1SCR837 ; Ram Swarup v. Joti : AIR1933All321 ; Chuni Lal v. Mukat Lal, : AIR1968All164 ; and R. D. Sethna v. Mirza Mahomed, : (1907)9BOMLR1034 and Santdas Moolchand v. Sheodayal, : AIR1971Bom237 . Turning with these principles to apply to the provisions of Section 2 (n) which defines lease for the purpose of Stamp Act, the grounds may be clear by referring to the purposes of the Act itself. It is under Entry 63 of List II, i.e., the State list of Seventh Schedule of the Constitution, that the State Legislature has enacted the provisions of the Stamp Act with a view to collect stamp duty in respect of documents. Reference to the preamble itself shows that the nature of duty is payable on documents or instruments and not on mere transactions. Provisions of Section 3 in Chapter II makes the instruments chargeable with duty as contained in the Schedules appended to the Act and reference to other provisions of Section 3 in Chapter II makes the instruments chargeable with duty as contained in the Schedules appended to the Act and reference to other provisional like Sections 4 to 6 emphasises that it cannot be the intention of the Legislature to collect duty on transactions. Provisions of Section 3 in Chapter II makes the instruments chargeable with duty as contained in the Schedules appended to the Act and reference to other provisions like Sections 4 to 6 emphasises that it cannot be the intention of the Legislature to collect duty on transactions. There is a clear distinction in the legal affairs of men which can be taken note of in that transactions may be effected having legal effects without resort to formal inscribing of them in the shape of documents or instruments. Sometimes by the instruments the legal rights may stand conveyed and sometimes without it. Instruments may be inscribed and executed just to witness the completed transactions and similarly instruments or documents may come in existence with a view to create rights and obligations in future. There may be executed, executory as well executable instruments which may take the formal shape of agreements or which may be spelt out by the documents that pass between the parties. Question in each case while applying the provisions of fiscal statutes like the Stamp Act is a question of fact to be determined taking into account all the relevant circumstances, the nature of transaction and its legal effect, leaning always in case of doubt to favour the subject from the tax law.
3-A. Section 2(n) of the Bombay Stamp Act which has to be applied to the present case is peculiarly worded and it defines 'lease: as meaning 'a lease of immovable property' and then proceeds to include certain other instruments like (i) a patta, (ii) a Kabulayat, or other undertaking in writing not being a counter-part of the lease to cultivate, occupy or pay or deliver rent for immovable property (iii) any instrument by which tolls of any description are let and (iv) any writing on an application for a lease intended to signify that the application is granted. Resort to such an inclusive definition clearly shows that but for the inclusions the instruments mentioned in clauses (i) to (iv) would not be within the meaning of the term 'lease' as contemplated by the definition itself. Being the provision in Stamp Act which deals with instruments, the primary definition of the word 'lease' would mean that it must be an instrument creating a lease of immovable property. If there is no instrument or document the question of application of the definition does not arise. The lease of immovable property by itself postulates a transfer of a right to enjoy such property made for a certain time or in perpetuity in consideration of a price paid or promised or in consideration of money, share of crops, service or any other thing of value to be rendered periodically or on specified occasions by the lessor to the lessee. This legal concept of lease is contemplated by Section 105 of the Transfer of Property Act and that shows that there are three basic requirements to make any transfer a lease. Firstly it is a right of enjoyment of immovable property which is the subject-matter of transfer. Secondly it is in consideration, either paid or promised, or to be rendered periodically by the lessee to the lessor. Thirdly it is a transfer either for certain time or in perpetuity. If these three incidents are available in a transaction between the parties, i.e., between transferor or lessor and transferee or lessee and they effect the demise of the immovable property there comes into existence the lease of immovable property. Under the provisions of the Transfer of Property Act there are several types of leases contemplated and several of them do not require any instrument to validity create rights to enjoy the property. It is only when the lease of immovable property is from year to year or for any terms exceeding one year or reserving any yearly rent, the law requires that the lease has to be made by a registered instrument (See Section 107 of the T. P. Act). It follows excepting in the cases of S. 107 of T. P. Act, there can be a lease for shorter durations or reserving rent for shorter periods of the immovable property under which the right to enjoy such property is transferred by the lessor to the lessee.
4. Therefore, the question is whether the demise is created by the document in question or in other words whether it is a lease transferring right of enjoyment in favour of the lessee.
5. Over-all terms of Annexure A-2 i.e. the disputed document shows that this is not an instrument of lease as it does not create any demise is already agreed upon separately and independently of the document itself. As stated earlier that these can be oral or in the shape of negotiations agreed upon separately between the parties lease may become effective. Collateral terms of such demise or transfer are not decisive of the question. In determining the nature of the document for the purpose of Stamp Act it should be the document of lease and under it the transfer. Central consideration must be to find out the nature and the legal character of the document. In the matters of lease the crucial question always is whether it is the instrument that creates the lease or demise of the immovable property as understood by law. Negatively put the question would be, whether without this document there is a lease or demise that binds the parties in the matter of rights transferred for the enjoyment of immovable property.
6. The document itself says that the agreement has already been arrived at and party has described itself as a tenant and conveyed the terms and conditions of the tenancy which has already come into effect. As stated earlier, therefore, these can at best be the collateral terms apart from the demise or the lease of the property.
7. Closer scrutiny of the terms merely shows that in it are contained the general conditions which the parties will follow during the continuance of lease independently taken. This is a possible construction of the document and as such it would be impermissible course to treat this document by itself creating the demise or lease and to apply the provisions of Section 2(n) and seek to impound it calling upon the party to pay stamp duty under Article 36 (vii) and corresponding penalty.
8. That part of the order impugned is, therefore, unsustainable and is set aside. However, it is obvious as stated above the these terms and conditions are in the nature of agreement independent of the lease and squarely calls for the stamp duty that the agreement between two parties must bear. The stamp duty leviable would be Rs. 3.50 along with the penalty ten times thereof being Rs. 35/. Upon payment of this duty and penalty this document of agreement will be impounded and report to that effect would be sent to the Collector as required by law.
9. The revision thus is allowed and the order impounding the document is modified to the extent indicated above. The trial Court after impounding the document will permit the parties to lead additional evidence if they desire to do so and then proceed to hear them on merits of the cause and decide the suit according to law. Though the rule in the revision is made absolute, there would be no orders as to costs.
10. Rule made absolute.